Salient features of a robust Enterprise Risk Management framework

To prevent any form of fraud/operational/financial/cyber risks, it is imperative that an organisation has a sound risk management framework implemented and tested continuously for its effectiveness in light of changes in business environment and legislations. 

Below are the key pointers in a risk management framework: 

1.Enterprise-Wide Risk Assessment:

 Entities regardless of size and scale of operations, need to conduct a comprehensive and continuous risk assessment covering all departments and sub processes as per the frequency and timelines determined by Board of Directors/Executive Management. The risk assessment should not only include any operational or financial risks identified and evaluated but also lay emphasis on prevention of internal fraud/external fraud and emerging cyber-attacks.

 2.Control Testing and Control Overrides:

 Testing of controls need to be on a conducted on a continuous basis as per directives laid down by the board. Effectiveness of the control system should be assessed continually and monitored at the top management through status reports and action plans. Control overrides should not be encouraged at the operational activities carried out at the junior level. Appropriate documentation and justification by management to be in place in case of any overriding of controls. 

3.Internal Audit:

 Acting as an independent function, the internal audit team should continuously test the effectiveness of the control system implemented at the entity level during their audit schedules. Any gaps identified during the audit should be immediately brought to the notice of the management and appropriate follow ups to be made till corrective action is taken and implemented.

 4.Documentation:

 Documentation is the key to existence in a risk management framework. All procedures, manuals, guidelines, detailing the controls implemented at the process and sub process level should be vetted by appropriate level of authorities. Version control should be in place for any changes made to any existing procedures.

 5.Tone at the Top:

 The most important feature of all is the monitoring done by the Executive Management/Board of Directors in the functioning of risk management framework. Stringent monitoring through communication and status reports will help the management in effective decision making. A sound risk management framework also sets as a performance standard in meeting out organisational goals and objectives thereby contributing to profitability, increased client confidence and business growth.